Management companies tackle challenges of the new millennium

As revenues remain steady, managers look to solve the employee shortage and keep up with the Internet revolution.

For many segments of the hotel industry, times have seldom been better. Occupancy rates are up in most major cities, and managers say they're having little difficulty filling rooms.

The good times have arrived for travelers as well. In today's high-tech age, hotel chains are rushing to offer more and better services to the business traveler. No longer should weary business travelers expect just in-room movies. Today, guests are likely to find many of the conveniences needed to turn a hotel room into an office away from home.

Still, there are dark clouds gathering on the horizon. Finding staff to serve meals and clean rooms - never an easy job - is getting tougher than ever. And as a once robust economy shows signs of slowing, hotel owners know that they may be among the first to feel the sting of budget cutting.

Searching for help At hotel management companies across the country, HR departments are serving a rich menu of compensation benefits designed to attract and retain employees. Wages are up at many companies, and health benefits and 401ks are being added to employment packages. Still, hotels are finding it increasingly difficult to find enough help to fill positions such as food and beverage, back office and housekeeping.

"Although we've enriched our compensation package, we're still having problems because there are just not enough employees," says Jay Witzel, president and chief operating officer of Minneapolis-based Radisson Hotels and Resorts. "It's a matter of there being a shortage of humans to do the job more than a compensation issue. We don't have a problem attracting people where there is a choice [of positions]. Where we have a problem is where there is no choice."

While many front-line positions may be hard to fill, Radisson has less difficulty filling management positions. In an era of mergers and corporate downsizing triggered by a chaotic stock market, many career employees are attracted to the stability of a privately held company.

In addition, while some areas such as Orlando, Fla., may be experiencing severe labor shortages in the industry, others such as New York, Philadelphia, Chicago and San Francisco have more workers.

However, the consensus of managers is that labor is one of their biggest concerns.

To make matters worse, in an economy marked by low unemployment, hotels are not only competing with other hotels for workers - they are competing with other types of businesses as well.

"There's a lot of competition, particularly on the low end," asserts Morris Lasky, CEO of Lodging Unlimited Inc., Chicago. "If McDonald's is paying more for someone who would be a maid in a hotel then you've got to compete on that level. We have to go toe-to-toe with a lot of other companies [for every position], from desk clerks right through to junior level executives and senior level executives."

Lasky says his company is doing anything it can to find and attract more workers. "We're raising the rates if we have to, and looking in other areas, such as senior citizen help, which hasn't been done a lot but is being done more and more," he says. "It's not unlike Wal-Mart where they've taken advantage of it [using older workers]. We're visiting a lot of colleges and universities to tell people what we do. We're putting a lot of ads in the trade publications. It's an all-out battle to find people."

Along with cash outlays, companies are biting the bullet and offering better health plans by including families, and offering more choices of plans. At Lodging Unlimited, Lasky notes that health benefits often are the first issue job applicants ask about. And at Washington, D.C.-based MeriStar Hotels & Resorts Inc., CEO Paul Whetsell notes that it's easier to recruit workers than it is to hold on to them. Waiters, housekeepers and other service positions tend to be transient.

"We're a growing company, so our ability to give people some career opportunities is pretty significant," says Whetsell. "It's important that people can have other opportunities because we're a rather large company with 35,000 employees already."

In addition to upward mobility, MeriStar offers stock purchases and pension plans. While these benefits may prove attractive to employees on the upper end, it is far less so to those on the lower level.

"There are people in our business who don't have those same kinds of career aspirations," he observes.

In addition, many lower-paid workers who may be living virtually paycheck-to-paycheck may not see the value of a stock plan when they're having trouble paying the electric bill. Many workers also move to other jobs that pay more money.

For those who do stay, the larger companies are emphasizing the ability to rise through the ranks to positions of greater responsibility.

"I can tell you that personally I've taken people from the lower levels to general management," says Lasky. "I would say that I've probably moved 25 to 30 people through the ranks. I like it when people work their way up through the ranks."

Tech age moves to the guestroom Hotel companies also are making an increased effort to provide high-tech benefits to guest quarters and meeting rooms alike. With business travelers demanding more of an office away from home, rather than simply a place to lay their heads, hotels are designing rooms with their needs in mind.

"We are putting in high-speed Internet into all of our guestrooms," says Whetsell. "This will allow us to not only provide a service for our customers, but also communicate directly to the customer a little more."

Owners are realizing that room design is important as well. Even simple matters such as the location of the data port and the power source for a computer are important. Some rooms come with large work desks that allow guests to lay out their computers and papers, while some corporate rooms even come equipped with printers.

"How the room is laid out is important," says Whetsell. "You no longer have to crawl under the bed to find the jack to plug in your computer."

Being able to plug into a high-speed Internet connection is so important that by the end of this year it's going to be a requirement in every hotel room, believes Jill Higgins, director of information systems at Hostmark.

Providers have had a difficult time wiring buildings as they have promised, say managers, but the move to high tech is rapidly picking up speed. These services, which can include the guest logging on to a service provider that can offer a variety of services, present the promise of additional revenue to the hotel.

"At first there were a lot of big players putting in high-speed Internet in hotel rooms and meeting rooms," says Higgins. "Some of the companies have gone under and some can no longer continue with the models they developed. Many of them are taking another look at what they're doing. Where it's a franchise hotel, we're analyzing what agreements the franchise has with the various companies to see if that's the way we want to go. Many times because of volume the franchise can get a very lucrative deal."

Internet reservations The Internet is not only available for guests in their rooms, but it is often the way customers get there in the first place. Hotels now are taking reservations on-line - either through their own sites or through Web sites such as Expedia.com, Priceline.com, Travelocity.com and a host of other engines.

"Initially, a lot of people were just going to the Web site and looking at different locations, different hotels, deciding on which one they wanted and then calling directly into the hotel or the central reservation office," says Higgins. "That's what we want to avoid. We want them to book directly. You are seeing that people are booking directly through the Internet. It's coming around."

Discounters such as Priceline.com have not driven down the rates at hotels because most of the reservations have come through fill-ins at many properties. At the very least, managers say they hope the customer who comes to their hotel first through Priceline will come back through their own reservation system in the future.

"Our ability to drive more occupancy and rate has been unprecedented," says Whetsell. "It hasn't had a negative impact. We've tried to use it as supplemental business. We have very sophisticated yield-management programs within the hotel industry today. They allow us to use those programs when we need them, just like an airline does."

Although Internet bookings have been slower to take off than expected, most companies think the Internet will play a significant role in the future. In fact, some hotels are already enjoying considerable success in moving more of their traffic to the Internet rather than channeling it through a human operator.

At Hostmark's Mount Airy Resort in the Pocono Mountains, more than 26% of its transient room nights are booked through the company's Web site. That success has allowed the company to cut its literature mailings in half.

In the future, company Web sites as well as travel discounters may very well move more toward convenience and provide information rather than attempt to offer the lowest price, say managers.

E-procurement takes off As some company CEOs will readily admit, the hospitality industry has traditionally been behind the curve when it comes to adopting technology. Now companies are rushing to catch up with other industries.

While most companies have adopted the tools of wide-area networks and high-speed connections to link distant properties to the home office, many have been slower to adopt the full richness of the Internet. While many industries have formed e-procurement portals that offer the power of mass buying, only a few have sprung up in the hotel industry.

"We will be making a big push to analyze the various e-procurement sites, see if we want to align ourselves with them and determine if it's going to save our ownership money," says Higgins, echoing the sentiments of other companies.

MeriStar is one company that has set up its own e-procurement program. Almost 85% of the supply purchasing is done through this Intranet-based site. This initiative lowers prices for frequently used staples and non-perishables.

Although Whetsell says it has been difficult to put a dollar figure on cost reductions, he figures the savings to be 5% to 10% of overall purchasing costs.

Troubling signs Hotel companies aren't exclusively focusing on finding workers and developing technology. Many CEOs admit the economy is presenting some troubling signs that they must watch closely.

"Our industry is the most sensitive to the economy," says Lasky. "As soon as there are cutbacks and companies decide they have to watch their pennies, the most expendable item is travel."

Some companies are moving to reduce costs and reap the full benefits of technology. For example, increased Internet bookings have reduced marketing costs.

Other companies are seeking a niche in the market that will allow them to take full advantage of the profitability of a particular hotel. Radisson is aggressively moving to reposition assets to a higher level.

"We're taking two-and-half to three-star assets up to three-and-a-half star assets," says Steve Miller, executive vice president for developments and acquisitions. "We've taken a Clarion, which we purchased in Texas, and positioned it up through renovation to a Radisson three-and-a-half star brand. We're finding that if you buy the property correctly, you have enough room to fix the property and still have good margins for profitability."

For hotel management companies, the dawning of the new millennium presents not only great opportunity, but some sobering challenges as well. While business is steady, companies know they must tread carefully in an unpredictable economy. At the same time, hotels need to move aggressively to ensure that the products they offer meet the needs of their customers.